Foreign Investors Fund DC Commercial Real Estate

Posted by on Tuesday, August 6th, 2013 at 10:26pm.

Foreign Investors own a great deal of commercial real estate in the District of Columbia. They are funding major development projects and purchasing existing office buildings. Some of the investments are government funds from countries like Norway and Qatar, while others are from private investment groups in Korea, China, Germany, and Saudi Arabia. These foreign investors are all looking for a stable investment with predictable returns over a long period of time.

The head of Jones Lang LaSalle’s International Capital Group for the Americas, Stephen Collins, says that foreign investors want stability. “But they’re also looking for a market dynamic that has an ability not to produce more assets for lease or for sale. So Washington DC has a very finite market -- Massachusetts Avenue, Pennsylvania Avenue, to the Capitol, to Georgetown.”

CityCenterDC, a 10-acre mixed-use neighborhood with 458 apartments, 216 condos, 295,000 square feet of retail/restaurants, and a 1.5-acre public plaza, is set to open this fall. The development, at the site of the old Washington Convention Center in Penn Quarter, got off the ground with $700 million from Qatar’s foreign investors.

This summer, foreign investors from Korea purchased Washington Harbor, a complex on the Potomac River in Georgetown with waterfront restaurants like Sequoia and Tony & Joe’s. The investment totals about $360 million from several Korean pension funds.

In the world of hotels, the new Marriott Marquis at the DC Convention Center was funded by foreign investors from Abu Dhabi. The historic St. Regis Hotel, north of the White House, was once funded by foreign investors from Ireland, but they lost the building during the financial collapse. French investors bought the Watergate Hotel at auction years ago, but it’s still vacant.

Jonathan O’Connell, commercial real estate and development reporter for The Washington Post and Capital Business, asserts that, “Buying an office building in downtown Washington looks pretty stable compared to what else is out there.” He also claims that, “Our real estate values came back very quickly.  And with the federal government being here, there’s an expectation that the real estate market here will be strong coming out of the recession compared to a lot of other parts of the country.”

According to O’Connell’s reports, almost $1.9 billion in DC commercial real estate was purchased by foreign investors so far in 2013. That's a steep rise from the $1 billion for all of 2012 and $807 million in 2011.

Perhaps the next big development project at the Southwest Waterfront, Hine Junior High School, Walter Reed, or even the streetcar system on H Street might be funded by foreign investors.

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